As the car continues its transition from a hardware-driven machine to an electronics and software device, the automotive industry’s competitive paradigms are changing. Software, large computing power, and advanced sensors are the emerging factors of competitive edge. They enable innovations and the progress to connectivity to autonomous driving to electrification and new mobility solutions.
However, there is increasing complexity. The large number of software lines of code (SLOC) contained in modern cars vindicates this. The type of vehicles which had about 10 million SLOC in 2010 now has over 160 million lines. The compounding complexity also creates software-related vulnerabilities, as has been evidenced by millions of recent vehicle recalls.
The average software and electronics content per vehicle is also on the rise. From the present 10%, with an annual growth rate of 11%, it is expected to be 30% by 2030 in a D-segment, or large car. Players across the digital automotive value chain are trying to capitalise on innovations enabled through software and electronics.
The software companies and other digital-technology players are leaving their current Tier 2 and Tier 3 positions to engage automakers as Tier 1 suppliers. They are expanding their participation in the automotive technology ‘stack’ by moving beyond features and apps into operating systems. At the same time, traditional Tier 1 electronic system players are boldly entering the tech giants’ original feature-and-app turf, and premium automakers are moving into areas further down the stack such as operating systems, hardware abstractions, and signal processing in order to protect the essence of their technical distinction.
Similar to hardware-related uncertainties, software-related disruptions also are under way. Many strategic moves are possible: automakers could create industry consortia to standardise vehicle architecture; digital giants could introduce onboard cloud platforms; mobility players could produce their own vehicles or develop open-source vehicle stacks and software functions; and automakers could introduce increasingly sophisticated connected and autonomous cars. The transition from hardware-centric products to a software-oriented, service-driven world is especially challenging for traditional automotive companies. Yet, given the explosive trends and changes, there is no choice for anyone in the industry but to prepare for the changing paradigms.